2 Pricing Psychology Secrets Revealed

Pricing Psychology is one of the most fascinating areas of direct response marketing. In this post I’m going to reveal to you how you can change your pricing by a couple pennies and get 20-30% more sales. I’m also going to reveal a strategy where you can INCREASE YOUR PRICES and GET MORE SALES!!! Here we go:

1. Fractional Pricing

Psychologically speaking, there’s a huge difference in $29.99 and $30. Pricing theory says that products ending in an odd number (fractional pricing) convey greater bang for your buck than prices rounded up to the next whole dollar. This $.01 difference increases conversion rates by approximately 30%. And you better believe it has nothing to do with the one penny saving :p

The reason why fractional pricing converts so much higher than whole dollar pricing is really simple. Consumers believe that merchants whom price their product fractionally have priced it as low as possible, hence the odd number. The consumer completely ignores the last digits and sets a lower pricing in their head. i.e. If you’re looking for a home in the 200-300’s range, a house for sale at $299,999 automatically seems much more affordable than a house for sale at $300,000. The pricing difference is $1, yet consumers automatically fixate on the 200’s range when they see the house for sale at $299,999.

Research shows that prices ending in 98 or 99 convey much more savings than all other prices, including 49, 70, 80.

NOTE: Fractional Pricing decreases value for Prestige Items such as high-end items (Bang and Olufsen) and luxury brands (Gucci). Always round up to a whole dollar amount when pricing for Prestige Items. You should only use fractional pricing on non-luxury / non-high-end based items.

2. Prestige Pricing

If you have a high end or luxury based product, then you should round the pricing to a whole number. Rounded whole numbers increase the perceived value of brands. i.e. $5,000 suggest higher quality than $4,999.99. Louis Vuitton, Hermes, Gucci, Bang & Olufsen, and LimeLight CRM all round up to whole numbers. Subsequently those lines scream HIGH QUALITY!

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Rich Gorman

Rich Gorman is an internet entrepreneur that builds businesses for both a living and a hobby.

Thanks for the tips on pricing prestige brands. I honestly wouldn't have thought that it would be so totally opposite than pricing lower end products. It does make sense though, its all about what we perceive things to be worth.

This is such a great point! Fractional pricing often goes unnoticed by the consumer. I know I have fallen for it myself, and I know this trick! When you think of $29.99 you think, “Oh my product is around $20 or so.” But when the price is just listed at $30.00 flat you think, “Wow, this product is around $30!” Great post, thanks for sharing!

There is a huge difference between $29.99 and $30.00! Although it is only a penny, it can easily turn into a $10 difference.
Wife: “Honey, I saw a really cute top today at the store, I think I am going to go back and get it tomorrow.”
Husband: “How much is it?”
Wife: “I can’t remember, like $20.”
The buyer remembers the 2 and that is it. I have personally had this happen to me, I couldn’t remember how much something was and I rounded way down, when actually it was only a penny away from $30.

Great post Rich - I've seen this pricing play out many times, and rounding up to whole dollar amounts with no discounts does scream high quality. It also screams high demand. A lesson I've learned as a service provider is that if you want more business, always be busy. The second part which people rarely discuss is to price accordingly too. You've covered that quite well here.

'there’s a huge difference in $29.99 and $30' - this is so true! I'd rather buy something with a .99 then rounded off to the nearest ten. Honestly, it seems as if one is saving so much when in actual fact we are not - gotta love how the mind works!

Absolutely agree.
The difference between $29.99 and $30.00 is huge.
It's the difference between Wal-Mart and Neiman Marcus.
It sets the tone for your entire strategy. Are you going to compete on price ($29.99) or on differentiation ($30.00)?